Fines & Penalties Monitor: February 2017

March 08, 2017 at 2:05 PM


In February, our large bank group – the 18 largest institutions headquartered in the U.S. and E.U. – incurred only one fine, bringing total fines, penalties, and settlements to $565 million. 

Royal Bank of Scotland was fined $85 million by the CFTC for attempting to rig the U.S. Dollar ISDAfix benchmark, a global benchmark for interest rates, from January 2007 to March 2012.  The CFTC has previously fined three banks, Goldman Sachs Group, Citigroup and Barclays, over similar attempts to rig ISDAfix.  RBS has agreed to administer new controls that are intended to increase the integrity of the bank’s participation in setting interest-rate benchmarks. The new controls include measures that would detect and deter trading that has the intent of manipulating swap rates.

With a new administration in the White House, banks are keeping an eye on how the regulatory landscape might change. Recent actions and statements made by the current administration seem to suggest that regulations on banks and other financial companies will loosen over the next four years. Early February, President Trump signed a directive that gives the Treasury Secretary the authority to restructure major provisions of the Dodd-Frank Act and make sure the laws align with “core principles” such as “empowering American investors and enhancing the competitiveness of American companies” and making “regulation efficient, effective, and appropriately tailored.”  

On the Hill, one of many priorities for the 116th Congress is the passage of the Financial CHOICE Act, authored by House Financial Services Committee (HFSC) Chair Jeb Hensarling (R-TX). The Financial CHOICE Act, which passed the HFSC and is expected to reach the House floor this summer, intends to rollback much of Dodd-Frank. One provision would allow large banks to be exempt from several regulatory standards if they maintain a ratio of capital to total assets of at least 10%.  The bill also aims to repeal the Volcker Rule, which makes it illegal for banks to make risky bets with depositor money, and replace how troubled banks are wound down with a new chapter of the bankruptcy code.  The Financial CHOICE Act would additionally remove the Durbin Amendment, which limits the fees retailers are charged for debit card transactions.

Outside of changes to the Dodd-Frank Act, the new administration’s priorities are not yet clear. We expect the next month or so to be quiet – with the exception of the resolution of any lingering RMBS or forex-rigging related cases.

Eileen Sullivan

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